ICBA Opposes Lower Capital Standards for Credit Unions

Washington, D.C. (Sept. 29, 2005) - The Independent Community Bankers of America (ICBA) criticized a proposal by the National Credit Union Administration to lower the capital requirements for federal credit unions that participate in that agency's Regulatory Flexibility Program or RegFlex.

"In many cases, credit unions have exceeded their statutory mission and use their tax-exempt status to unfairly compete with taxpaying community banks," said Camden R. Fine, ICBA president & CEO. "This proposal by NCUA expands the powers of many credit unions and diverts them from their central mission of serving the credit needs of low-and-moderate income consumers."

In a letter to NCUA, ICBA also argued that the proposal increases the risk exposure to the NCUA Share Insurance Fund. "Credit unions that participate in the RegFlex program should be subject to a higher capital requirement than the 7% minimum capital standard for well-capitalized credit unions," the letter said.

ICBA has long opposed expanding powers for credit unions as long as they enjoy a tax-exempt status and are not subject to the same laws and regulations - such as taxation and the Community Reinvestment Act (CRA) -- as banks. NCUA has asked Congress to lower the well-capitalized net worth requirement to 5% from 7%. Congress has not acted on the NCUA legislative plan. By reducing the capital requirements for RegFlex, the NCUA is allowing more credit unions to take advantage of the program and therefore be exempt from a number of restrictions including limits on fixed assets, taking non-member deposits, and purchasing certain loans.

"NCUA should not be trying to circumvent the intention of Congress by taking regulatory action to reduce the capital requirements for 3,400 credit unions that participate in the RegFlex Program and that are not subject to the restrictions that other credit unions are subject to," said ICBA in its letter.